Welcome to Glaukos Corporation’s First Quarter 2020 Financial Results Conference Call. A copy of the company’s press release issued after the market closed today is available at www.glaukos.com. (Operator Instructions)

This call is being recorded, and an archived replay will be available online in the Investor Relations section at www.glaukos.com.

I will now turn the call over to Chris Lewis, Director of Investor Relations and Corporate Strategy and Development. Please go ahead.

Following our prepared remarks, we’ll open the call to questions. To ensure ample time and opportunity to address everyone’s questions, we request that you limit yourself to one question and one follow-up. If you still have additional questions, you may get back into the queue.

Please note that all statements other than statements of historical facts made on this call that address activities, events or developments we expect, believe or anticipate will or may occur in the future are forward-looking statements. These include statements about our plans, objectives, strategies and prospects regarding, among other things, our sales, products, pipeline technologies, our U.S. and international commercialization efforts, the efficacy of our current and future products, our competitive market position, financial conditions and results of operations as well as the expected impact of the COVID-19 pandemic on our business and operations.

These statements are based on current expectations about future events affecting us and are subject to risks, uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Therefore, they may cause our results to differ materially from those expressed or implied by forward-looking statements. Review today’s press release and our recent SEC filings, including the risk factors section on our most recent Form 10-K for more information about these risk factors. You’ll find these documents in the investors section of our website at www.glaukos.com.

Finally, please note that during today’s call, we will also discuss certain non-GAAP financial measures, including results on an adjusted basis. We believe these financial measures can facilitate a more complete analysis and greater transparency into Glaukos’ ongoing results of operations, particularly when comparing underlying results from period to period.

Please refer to the tables in our earnings press release that is available on the Investor Relations section of our website for a reconciliation of these measures to the most directly comparable GAAP financial measure.

With that, I would like to turn the call over to Glaukos’ President and CEO, Tom Burns.

Thank you, Chris. Good afternoon, and thank you for joining us today. The coronavirus global pandemic has created an unprecedented time for all of us in different ways, both professionally and personally. I want to start by saying, on behalf of everyone at Glaukos that our hearts go out to all those affected by COVID-19, and we are especially grateful for the health care workers and first responders who are selflessly serving on the front lines.

Before we talk about our first quarter performance and the current trends in our business, I want to provide an update on what we have been doing at Glaukos in response to this rapidly changing environment. I have been thoroughly impressed with the response and resiliency of our employees around the world who make up the strong foundation of our disruptive franchises in glaucoma, corneal health and retina disease.

Despite negative personal and professional impacts induced by COVID-19, our employees have initiated a new fundraising campaign through the Glaukos charitable foundation that allows them to contribute money to charitable organizations providing relief for those affected by this pandemic. I want to especially thank them for their dedication and commitment on maintaining their important work to move the company, their families and their communities forward during this challenging time. I am confident we will get through this together and emerge an even stronger, more efficient and more capable company. We are also building upon our long-standing mission to offer product donation and patient assistant programs, providing access to our technology for those who lack access to care or insurance, including those who have lost insurance benefits due to the COVID-19 pandemic.

As the current situation emerged, we immediately developed and implemented business contingency and continuity plans beginning in the first half of March and executed on several key initiatives as the current crisis began to unfold globally in mid- to late March. Our response plans were guided by several key priorities. First, protect the health and safety of our employees and their families; second, to support our customers; third, to preserve jobs globally; fourth, to protect core research and development projects; and finally, fifth, maintain our strong financial and operating position following this pandemic.

As many of you know, a safety first mantra is at the core of our company’s foundation and our patient-centric mission yet these past few months have greatly expanded the importance of that commitment in really an entirely different way. Our top priority has been to protect the health and safety of our employees and their families, our customers and their patients, our clinical investigators, our suppliers and the communities in which we operate. While the majority of our employees have been required to work from home, we have maintained streamlined manufacturing and assembly processes in order to consistently provide product to our customers who depend on us. Glaukos employees involved in such operation-critical processes have been organized into a number of small shifts designed to minimize the time any one individual is required to be on site. We’ve implemented numerous health and safety protocols at our sites following CDC guidance and local regulations, and we’ll update those as needed going forward. I’m pleased to say that both of our main sites continue to operate during this period, albeit differently, and our supply chains have experienced minimal disruption to date.

In order to sustain us through this period of uncertainty and maintain jobs and our strong capital position as we come out of this pandemic, we have implemented a number of cost-containment measures. These include substantial reductions in discretionary spending and capital expenditures, temporary salary reductions for our executive team, senior leadership and many others throughout the company as well as other employment actions, and Joe will elaborate on these later.

While we are not immune from the economic impact from COVID-19, we did — I’d like to forgo pursuing the CARES Act, PPP funding so that this important source of capital could be directed to the truly small businesses in our communities that need it for survival. We believe our cost-saving initiatives, paired with our strong balance sheet leave us well positioned to ultimately provide our essential ophthalmic therapies to customers and their patients who will return for treatment as we move past the peak of this current crisis. We were pleased with the strengthening business trends experienced as we progressed into late February and early March. But as health care systems shifted resources to the treatment of COVID-19 and government restrictions on elective procedures and therapies were implemented throughout the world, we experienced material disruptions to our business. By late March, these restrictions led to increasing deferral of cataract and keratoconus procedures and global sales trends that were less than 15% of levels achieved prior to the COVID-19 outbreak.

Although our near-term sales have been temporarily disrupted, our commercial focus is not as we remain committed to deepening our customer relationships in new and creative ways. We have sponsored customer-oriented webinars hosted by well-respected ophthalmic surgeons to provide our customers with value-added insights into relevant hot topics such as the CARES Act, the current state of elective procedures, key business and operational considerations for an ophthalmic practice during this time and planning guidelines for reopening.

Our sales professionals remain hard at work, maintaining close engagement and dialogue with their customers through remote online training modules, regional conference calls highlighting the performance of our technologies, interactive case-based tutorials and various other customer support initiatives.

Within market access, our team in conjunction with our customers, continues to work with providers and payers to optimize the Photrexa reimbursement landscape, training office staff on claims and contractual processes and expand our ARCH claims program. Internally, we continue to execute on our commercial integration plans through cross-functional training, key account targeting and market segmentation deployment. While many of our customers’ practices have been largely shut down during this time, our commercial focus and customer dedication remains strong. The enduring partnerships we have built over the years with our customers are more important than ever. We are proud to partner with them as they navigate through these unprecedented times. Our commercialized ophthalmic solutions address chronic diseases that only worsen as patients are often treated. Given the medical necessity of these interventions, we believe most of these deferred procedures will ultimately be performed in the future as the COVID-19 pandemic subsides. But it remains difficult to predict the specific timing and slope of this recovery curve.

I am encouraged by the recent indications of plateauing and even declining infection rates and deaths from COVID-19 in many areas of the world, along with many U.S. states that have begun the reopening process. At the same time, we recognize the challenges and risks and the potential for unpredictable spikes in COVID-19 infection rates that remain ahead of a vaccine or therapeutic solution. We continue to analyze both the COVID-19 drivers of return to treatment and customer input regarding their restart plans and processes. Not surprisingly, we see a variety of potential scenarios for our business as ophthalmic practices begin to reopen and elective procedures return.

From a high level, we currently expect the phased and deliberate return beginning slowly in May and June to increasingly more normalized levels for cataract and keratoconus procedures by later 2020, subject to any resurgence of COVID-19 in the fall and winter months. The rate of return for elective surgery may also be driven by site of service, site restrictions and type of care with the physician office and ambulatory surgery center settings recovering before hospital-based procedures.

As a reminder, all of our glaucoma technologies are used in outpatient surgeries, 80% of which in the United States are estimated to be performed in ASCs. And our Photrexa solution for keratoconus is primarily performed in the physician’s office. The reopening process will include heightened safety protocols and ophthalmic practices to ensure the safety and instill patient confidence. We will closely support customers as they bring capabilities back online and follow the reopening guidelines and recommendations from the CDC, Coronavirus Task Force, the American Academy of Ophthalmology, and other key societies detailing specifically how to approach and manage some of the key decisions in reopening more normal practice in the post COVID-19 era.

We know our customers are eager to get back to work to treat their patients, and we’re ready to support them.

Moving on to our pipeline, which consists of 13 publicly disclosed programs in various development and clinical stages and another 10 yet to be disclosed development programs also underway. A number of these pipeline programs are in active pivotal clinical trials, including iStent infinite, Epi-On and iDose TR. For these trials, we are actively assessing potential impacts due to COVID-19 disruption. Our top priority within clinical operations is to protect the health and safety of our clinical field personnel, investigators and participants currently enrolled in our clinical trials. And in addition, we’ve implemented a number of measures to maintain the integrity of these trials in a manner to fully satisfy regulatory requirements. We’ve worked with clinical investigators to closely monitor and to help assure patient compliance with clinical trial protocols and are also planning numerous virtual investigator meetings over the coming weeks.

We’re encouraged with the FDA’s recent communication and position on these clinical trial matters during the COVID-19 pandemic, and we’ll continue to collaboratively work with the agency to advance our clinical programs in a safe and timely manner to ensure study viability. The clinical trials for iStent infinite and Epi-On have already fully enrolled. And although they may experience some modest delays in patient follow-up plans, we continue to express confidence in our previously disclosed FDA approval targets of late 2021 and ’22, respectively.

For iDose, where we have been rapidly progressing to patient enrollment completion, the temporary closure of ophthalmic practices and deferral of elective procedures caused by COVID-19 has led to a temporary pause on new patient enrollment. As investigator sites begin the process of reopening to more normal ophthalmic practice, we will work with our clinical partners to reignite the enrollment momentum that we’ve previously built. While the situation remains fluid, as of now, we believe that iDose may continue to be impacted well beyond the current shutdown as doctors focus on clearing their patient backlog over clinical trial enrollment. We plan to provide further updates on this front as we gain additional visibility in future quarters.

Importantly, despite this transient disruption, we maintain a high degree of confidence in the integrity and viability of our iDose clinical program given the trial’s design and protocol. We also remain in early preparations for the potential U.S. commercial launch of Santen’s Pharmaceuticals PRESERFLO MicroShunt, an elegant ab-externo surgical implant for late-stage glaucoma management.

During this time, we want to reassure our stakeholders that we are continuing to invest in our future. We have prioritized the investments we are making to focus on our near-term pipeline programs that we believe may drive significant value creation for our company over the coming years, balanced by earlier stage development projects where costs may be deferred. That said, we continue to advance our development efforts on our core clinical stage development programs as well as our Dry Eye and retinal R&D programs.

On such investment priority is within our expanding corneal health franchise, where I’m extremely pleased with the integration process, and progress as we execute on our corporate milestones, commercial strategies and cost synergy goals. While we remain in the early stages of unlocking the combined organization’s full potential, we are encouraged with the market’s receptivity to our fully integrated, expanded commercial organization and the customer-friendly initiatives we’ve introduced which helped drive more than triple the number of capital placements in the U.S. during the first quarter of 2020 versus the prior year period. These initiatives are also producing tangible results within market access, where we continue to solidify consistent payment for TREX’s product-specific J-code, which is now covered for 96% of commercial payer lives.

We’re also making substantial progress across a number of other business fronts with key accomplishments that include iStent inject regulatory approval in Japan, a stand-alone indication approval in Australia, a tariff increase in the United Kingdom, and an average increase of 44% to over $300 on professional fee 0191T professional fee from Noridian, a Medicare administrative contractor with jurisdiction in 13 Western U.S. states.

In summary, while we continue to actively monitor COVID-19 and its business disruptions, I remain confident that the longer-term fundamental prospects of our business remains strong as we seek to create a unique strategic vision care leader building, driving franchises in glaucoma, corneal health and retinal disease with novel therapies that disrupt conventional treatment paradigms, improve patient outcomes and create new, robust markets and market opportunities.

So with that, I’ll turn the call over to Joe to discuss our first quarter 2020 financial results. Joe?

Thanks, Tom. As a reminder, I will be discussing our financial performance on a non-GAAP or pro forma basis and will summarize our GAAP performance later in my prepared remarks. I encourage each of you to review our GAAP to non-GAAP reconciliation, which can be found in today’s press release as well as the Investor Relations section of our website. Further, considering the macro environment in which we are all operating, I intend to handle this section of our call a bit differently than is our typical pattern. I will attempt to provide brief perspectives on our first quarter, estimates of our current operating performance, and where possible, build upon Tom’s views on how we expect things to unfold as we progress over the course of 2020.

Glaukos’ net sales for the first quarter of 2020 were $55.3 million, and we estimate that the COVID-19 impact to our first quarter sales was approximately $9 million, with more than 2/3 of that impact in our U.S. glaucoma business.

In fact, as Tom noted, we exited March with a revenue run rate that was less than 15% of what we had experienced earlier in the month as procedures came to a virtual halt in nearly all of our major direct markets globally. That deceleration continued, particularly through mid-April, and our preliminary estimates for April indicate that our run rate was closer to 10% of our prior plan.

Now turning to our U.S. glaucoma franchise specifically. Our first quarter U.S. glaucoma sales were approximately $32.6 million, where, as I noted, we felt the most pronounced impact from COVID-19. To put this in the same context as the overall business, our U.S. glaucoma revenues exited March at approximately 3% of our prior daily averages, a trend that continued for the month of April. Further, as we discussed on our fourth quarter earnings call, these glaucoma results also reflect the impact from typical seasonality, late 2019 promotional activities, competitive dynamics and the near-term impact from our integration activities across our U.S. glaucoma and corneal health franchises.

We were encouraged by improving daily sales trends throughout the quarter prior to COVID-19. And it is worth noting that our daily results were approximately 25% higher in late February and early March when compared to the first half of the quarter.

Internationally, our glaucoma franchise delivered first quarter sales of approximately $11.6 million. The strengthening dollar represented a currency headwind of approximately $400,000 in the quarter. The COVID-19 impact to our international glaucoma business has varied by market, as you might expect, and we exited March at approximately 40% of prior daily averages. A trend that continued throughout April, where our preliminary estimates indicate a run rate of approximately 25% of plan. While impacted, we have seen some continued contribution from most of our major international markets, but most notably from Japan and to a lesser extent, Germany.

In corneal health, first quarter net sales were $11.2 million. The corneal health business exited the month of March at approximately 20% of prior daily averages, a trend that continued throughout the month of April.

The first quarter performance was almost entirely driven by U.S. Photrexa year-over-year sales growth of 26% to $7.5 million but we also saw a near doubling of new U.S. installations in the first quarter versus 2019 average trends, and as Tom mentioned earlier, more than a tripling year-over-year, an early but strong sign of the synergistic benefits of our Avedro transaction.

Going forward, we are encouraged by the fact that many of our key geographies are beginning the process of allowing elective procedures to restart, that the vast majority of our procedures and therapies are done in the ASC and physician office setting. And that we know that a patient backlog has been growing as the term elective, in our case, really refers to the timing of the procedure and not the need. And we’ve begun to see this as trends, particularly in our U.S. glaucoma business have been improving slowly in recent days. Having said that, we do remain cautious on the magnitude and pace of the near-term recovery. The environment and logistics for our customers from a patient consultation and surgery perspective may have an impact, and some patients, particularly the elderly, may continue to wait as long as possible.

It is also worth noting that we do expect COVID-19 to continue altering the way our existing and potential new customers engage with our sales force, even as elective procedures restart. As such, we do anticipate a continued impact to our new physician training, site adoption and utilization growth initiatives across our business. As Tom mentioned, we continue to pursue creative strategies to mitigate this headwind.

Our non-GAAP gross margin in the first quarter was approximately 84% versus 87% in the same quarter in 2019, which reflects largely consistent glaucoma gross margins and mix shift towards international glaucoma sales and a full quarter of Avedro contribution. It is worth noting that our non-GAAP adjustments to COGS include substantial adjustments related to Avedro acquisition accounting, COVID-19 related E&O and estimate inventory write-offs from the end of the first quarter.

Our overall non-GAAP operating expenses were approximately $64 million in the first quarter of 2020. As Tom noted earlier, we moved quickly in March as the COVID-19 situation unfolded. The actions we took did have some benefit at the end of the first quarter and are expected to generate approximately $25 million of quarterly cash operating cost savings in the second quarter versus our original plan. These savings are a combination of discretionary and variable expenditures, of course, and are not necessarily meant to be permanent, but were designed to preserve jobs and core R&D programs during this period.

Our non-GAAP SG&A expenses in the first quarter were approximately $41.1 million, including a now full quarter impact from Avedro. Our non-GAAP R&D expenses in the first quarter were approximately $22.9 million, reflecting the full quarter contribution of Avedro and our expanding development programs across glaucoma, corneal health and retina. It is worth reiterating that we continue to advance high priority projects such as iDose, Epi-On, iStent infinite and our lead retina Dry Eye and Refractive Programs.

We finished the first quarter with a non-GAAP operating loss of $17.8 million and non-GAAP net loss of $19.2 million or $0.44 per diluted share. Our GAAP net loss was $54.1 million or $1.24 per diluted share for the first quarter of 2020. We invested in approximately $800,000 worth of capital expenditures in the quarter, and we are temporarily deferring a significant portion of our planned 2020 CapEx, particularly those related to facilities expansion and consolidation plans.

As of March 31, 2020, we had cash, cash equivalents, short-term investments and restricted cash of approximately $173 million compared to $183 million at the end of 2019. We believe our strong current cash position, paired with our cost reduction initiatives discussed earlier, leaves us well positioned to preserve jobs and fund core development initiatives as we navigate this pandemic.

As previously announced, due to the rapidly evolving environment and continued uncertainties from the impact of COVID-19, we have formally withdrawn our 2020 annual guidance, and so I will not be providing you with updated specific estimates today. Although we cannot predict the specific extent or duration of the impact of the COVID-19 outbreak on our future financial and operating results, we have tried to provide insights where possible into how we are thinking about the range of potential outcomes for the second quarter and the remainder of 2020. And with that, I’ll turn things back to Tom for a few closing remarks.

All right. Thanks, Joe. So while the extent and duration of the current challenges are difficult to predict, I am confident we’ll manage through the current situation with the same resiliency and effectiveness as we managed through past challenges. And I believe we will come out of this an even stronger, more efficient and more capable industry leader. We continue to advance our strategic vision to establish Glaukos as a unique strategic vision care leader with tremendous potential for long-term growth and profitability.

This is Andrew Brackmann on today. Tom, maybe to start, as we sort of think about some of the possible scenarios that you laid out here for recovery, can you maybe talk and give a little bit more color on some of the key considerations that sort of led you to develop a scenario of that sort of mid-May, June beginning to recover?

Sure. Andrew, it’s Joe. I’ll jump in there to start. We obviously — you can imagine in a situation like this, we’re looking at a lot of different scenarios and talking to our customers on a daily basis. But what I can say is we’ve obviously — I think we saw a bit of a trough in the mid-April time frame. A slow — very slow recovery coming out of that over the course of the second half of April. And then we’ve been encouraged over the last handful of selling days as many of these geographies start the restarting process and how that’s translating into orders for us. But as Tom and I both noted, while we’re happy to see some of those trends beginning to recover, we want to stay cautious about what that means in terms of the pace of that recovery as it really is a unique situation across each geography and each of the practices within those geographies.

Okay. And then as we think about sort of the physician capacity in the system, to see all of these delayed cataract procedures and then begin to layer on the new patient volumes, how are you guys thinking about that in light of this new sort of dynamic here?

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Chris M. Calcaterra, Glaukos Corporation – COO [5]

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Andy, this is Chris. So we do know that there is a backlog of patients that these doctors are anxious to get to. And in my conversations with these surgeons, they’re comfortable with getting to them. What we don’t know is how quickly new patients will come in and what the appetite for patients will be to come into the offices and to see the physicians and to schedule their surgeries. We’re hopeful that this will be a growing trend where patients become more comfortable as physicians are starting to implement different patterns of how they will see these patients, having them wait in their cars before they come into the waiting room and putting in a number of things in place to help the patient feel more comfortable about seeing these doctors. So we’ll just have to wait and see. But I do believe that the backlog that was created from the March and April time frame, well, eventually, the majority of them be seen.

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Operator [6]

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And your next question comes from the line of Matt O’Brien of Piper Sandler.

It’s Adam on for Matt. I wanted to start with one. Just wanted to start with one on competition in the U.S. mix business. Just latest thoughts on competitive dynamics there. And then curious, have you heard anything about the competition in that marketplace and how they’ve been impacted from COVID-19? And I guess what I’m trying to ask is, are they well capitalized enough to continue to impact you going forward? And then I had a follow-up.

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Chris M. Calcaterra, Glaukos Corporation – COO [8]

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Okay. Andy — or excuse me, Adam, this is Chris. In terms of the dynamics of competition, I would say that very similar to what we talked about in the Q4 earnings call we saw in Q1, up until the COVID-19 impact in mid-March. And that was that we saw continued trying and trialing from Ivantis. We saw some continued work with the tissue destructive procedures. I would say that, again, what we’ve seen from Ivantis and Hydrus is what we’ve been expecting and there was no real big surprises there. The tissue destructive procedures, there’s a bit more of a larger sales force by a couple of these companies. So you’re seeing more commercial activity. But having said all that, we put a number of things in place programs, initiatives that we felt we were starting to see the impact of in the latter part of February and first part of March. Beyond that, and I can’t say much more, but it’s more of the same that we talked about in the Q4 earnings call. And we saw some positive results from some of these initiatives in the latter part of the quarter.

Okay. Got it. And then just for the follow-up. I wanted to ask about the OUS mix business and what you’re seeing there. Has Europe, I guess, started to come back online a bit? Or is it still a little slow to restart? And then Japan is under a state of emergency. So just wondering how you’re thinking about any potential impact to your business there in the coming months?

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Chris M. Calcaterra, Glaukos Corporation – COO [10]

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Sure. So Europe is — that’s a broad question because every country is a bit different. We’ve seen a little bit of an upstart in Germany, where they’ve — were pretty steady during the COVID crisis and have begun to do more procedures, although not significantly more. Japan, in the first quarter was kind of the shining star in terms of our international business, where they had continued to operate at a pretty good clip. They’re currently in holiday right now. So we can’t say how they’re doing right now. But a lot of these doctors are doing their procedures in private facilities and aren’t impacted by the shutdown that’s been taking place in the public and private hospitals.

I might add one thing quickly, Adam, which is I think Europe — and you heard it a little bit in our prepared remarks, in general, and in our international business, the trough on average wasn’t quite as deep as it was in the United States, right? So where we’re starting to see coming off the ground a bit in the U.S., Europe had continued to operate, albeit at levels far lower than what we typically had seen, but far higher than what we have been experiencing in the U.S. So I think that those markets have continued to be open to a certain extent. So we would expect the recovery curve here to be a little bit slower coming off of that base. As far as Japan is concerned, as Chris mentioned, we’ll have to continue to watch that. We’re obviously expecting there could be some potential disruption there based upon the trends of the diagnosed cases in the last couple of weeks in that region.

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Operator [12]

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And our next question comes from the line of Larry Biegelsen of Wells.

This is Kevin on for Larry today. Another kind of recovery question. We’ve obviously seen a number of states addressing a return for elective procedures, but I assume it will be a challenge to motivate some of these patients to come back right away. So the question is based on kind of what you’re hearing from your physicians, what percentage of mix procedures do you expect will eventually return? Do you expect some people to drop out of the system? And then I’ll ask my follow-up upfront. Completely understand you’re being cautious about trends improving from April. Would just appreciate any thoughts on how you’re thinking about the next few quarters in the business? You mentioned that later in 2020, cataract can get back to normalized levels. Are you implying there that you think we could be back to pre-COVID cataract mix procedure levels by, say, Q4? Just wanted to put a finer point on that.

Okay. Thanks, Kevin. Maybe I’ll start there. And if Chris or Tom want to add some color, they can. I think the way we’re thinking about the trends, and clearly, there’s a reason here why we’re not providing guidance because there’s a lot of uncertainty around a variety of the inputs as we go forward in any particular geography. What I can comment on is what we’ve been seeing. And from a big picture standpoint, how we think about it rolling forward. What we’ve been seeing, as I’ve mentioned before, was a trough that occurred in sort of mid- April, a slow climb out of that across the various areas of our business, U.S. glaucoma, international glaucoma and corneal health. And then a little bit of an uptick here in the last handful of days in the month of May. As we go forward, we’re going to be watching, like all of you, what happens with the pandemic itself in each of these geographies and how our customers really pull-through both that backlog as well as bringing new patients in. We have conversations on a daily basis with those customers. And they, as you might expect, want to get back to work and want to be treating these patients who need the therapy. But we stay relatively cautious about how that will translate into specific numbers in any given month or quarter. Because we know they’re facing a lot of logistics. We know that the different patients will be impacted in different ways, and they may be slower to come back than what even these physicians might expect. So that’s the real reason for the cautiousness. And it’s the reason for, I think what Tom said and I tried to reiterate, is that we expect a gradual recovery from where we’re sitting at today that kind of occurs on a month-to-month basis through the end of the year. And as we think about that end of the year exit period, obviously, it’s highly dependent upon in an environment in which COVID is not impacting in a significant way, where we’re at. We think there’s a potential of getting back to something that’s posed to normal. But I think I have to add to that, that remember, when you’re thinking about normal, the ability to grow the market will be impacted somewhat during this period of time, too. So normal is probably better defined. It’s kind of the run rate that had been being experienced versus maybe what was originally implied in our prior guidance on the fourth quarter call.

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Operator [15]

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And your next question comes from the line of Robbie Marcus of JPMorgan.

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K. Gong, JP Morgan Chase & Co, Research Division – Analyst [16]

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This is actually Allen on for Robbie. I guess just a little bit on the competitive side. So this is obviously like a huge impact on your business, both glaucoma and Photrexa. But when we think about your competitors, they’re generally smaller, less well capitalized. So in a kind of maybe perverse way, should we think about this impact maybe presenting an opportunity for you to really stabilize your competitive positioning?

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Chris M. Calcaterra, Glaukos Corporation – COO [17]

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Allen, this is Chris. And I’m not in a position to comment on the competition. But what I will say is we utilize this time to really engage our customers. We’ve reached out to them. We provided a number of webinars, online training programs, product-specific webinars. We used this time with our market access team to engage their office staff to work on reimbursement and to try and maximize what we can and leverage our relationships during this downtime.

Having said that, I think we continue to gain support and goodwill with our customers such that when things do open up, we’re hopeful that, that will bode well for us as we move forward through the summer months and into the latter part of the year.

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K. Gong, JP Morgan Chase & Co, Research Division – Analyst [18]

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Got it. And then just a quick follow-up. You mentioned briefly that you saw a tariff increase in the U.K. I was just wondering if you could elaborate on that. And then I guess, just like the kind of reimbursement headwinds that you had mentioned previously last year, how are the dynamics around that playing out?

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Chris M. Calcaterra, Glaukos Corporation – COO [19]

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Well, and I’m glad you asked that. There was a pretty significant reduction in the tariff in 2019. And in April, they published the new tariff in the U.K. and that equated to about GBP 30 across the 4 different codes. And so that was moving in the right direction.

Beyond the U.K. tariffs, other positive things that have taken place, perhaps the biggest one is that Noridian, the MAC here on the West Coast, there was an increase of 44% in their physician reimbursement, bringing their reimbursement in line with all the other MACs. Additionally, in Australia, we received approval for stand-alone and we’re excited about that. And the physician payment there is part of what it is when in combination with cataract surgery. So those are some very positive things that have occurred from a reimbursement standpoint.

A lot of helpful metrics. Maybe the first one, Joe or Chris, is there a new goal for the 500 docs previously that you wanted to train in 2020? And then Joe, I think previously, you talked about market growth of 10% to 13%. What contribution of that was coming from the new docs? Because clearly, that’s going to be pushed out. Was it 10%, 20%? Maybe if you can frame that for us that would be very helpful. And then I’ve got a follow-up.

Sure. Jon, thanks for the questions. I’ll take the 2 pieces that you laid out. So first, on doctor training, there is a new target per se. I mean, obviously, our sales force is going to continue to try to push forward on every front and bring as many doctors into the fold, and as Chris and Tom both alluded to, we’re pursuing creative strategies to make that happen. In the remarks, I tried to reference the reality that I expect there to be a headwind. But it’s hard to quantify that because, quite frankly, you just don’t know how impacted that will be as we start — we’re just at the beginning of this restart process, right? So I think — well the better sense here, as we get the next quarter or 2 under our belt moving forward than we do sitting here today.

On the overall market growth dynamics, what we always say is there’s a lot of different scenarios we run to come whether it’s with respect to our market growth forecast or our guidance in general and they have different numbers underneath them with respect to the drivers as you’re asking about, right? Whether that’s new doctor growth or same-store sales. You’ll recall that in 2019, what I said was of the growth that we saw, a higher percentage of that came from same-store sales utilization, if you will, than new doctor adds because we had been focused on that conversion. And our sales force was spending a lot of time with existing accounts. And you’ll also recall that when we talked about that dynamic in the context of 2020, we expected a shift back, we didn’t know how far back, but something a little bit more normal, where the new doctor initiatives, if you will, would be driving a bigger chunk of that market growth than the same-store sales initiatives.

Sort of push you a little bit there. If I said, going into 2020 pre-COVID, new docs could have been 300 or 400 basis points out of the 1,200 in market growth, you would say, right, ballpark or any response to those metrics?

Okay. And then second question, quickly. Chris, you talked about ongoing competitive environment, some moving parts with some of the players. I’m just curious, in the fourth quarter, I don’t think there was anything realized from price. Joe, you said it was largely volume-based. Can you just update us on the pricing environment for MIGS and if that’s stable or any pressure as we currently sit here today?

Yes. Let me just quickly, this is Joe. I mean, from a pricing environment, everything remains stable. In the first quarter, whether it was U.S. glaucoma or international glaucoma, our pricing remained stable relative to the prior periods. We saw a little bit of continued strength in price around the corneal health business. But that’s pretty much related to the continued improvements around reimbursement dynamics that Tom mentioned, and we’ve started to see that pass-through in terms of realized ASP on the Photrexa solution.

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Operator [27]

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And your next question comes from the line of Ravi Misra of Berenberg.

I hope you’re all doing okay. Just want to touch on competition, again, if I can start with that. Can you give us an update on the litigation status between you and Ivantis? It seems like in the last few days, there were some developments coming out of the district court there.

Yes, Ravi, this is Tom. And so — happy to do so. The trial, as you know, is scheduled to begin on or around July 28 this year. And as you know, between now and the trial, it’s really customary for both parties to follow a variety of motions. And some of those motions were heard on Friday, May 1. And with the tentative rulings that came out, we were quite pleased with how those were disposed of. We remain confident in our position. We know that currently in Orange County, the courts are closed through mid-May, and they’ll be prioritizing criminal cases once they reopen. But having said that, we are prepared and confident to go to trial on or around July 28. And so that’s kind of where we are at this stage.

Great. And then if I can ask a little bit — my kind of follow-ups on the COVID impact that you cited. If 2/3 of that was in the U.S. glaucoma base, should we think about the remainder with Avedro or international? How about that split? And then one on the pipeline. With iDose TR, I understand that you’re saying that there’s going to be a pause in new patients. But how many patients did you have enrolled so far? And kind of are you still going to be taking — how’s the follow-up there going? And kind of what can you talk about with the latest developments on the longer-term data that you’re trying to develop around that platform which is very kind of interesting.

I want to take the first part of this question first, Ravi. And so just to talk about iDose, we were rapidly progressing to the enrollment, patient trial enrollment completion in the latter part of this year, and that met — more than met our target expectation. And as you know, there was this temporary pause and disruption and what we’re trying to balance now is to figure out how that will — the interplay between the backload of perceipt of pent-up demand will play against the enrollment of new patients going forward. I’m encouraged with how we’re engaging with our clinical investigators going forward and some of the early translation and what that’s meant in terms of reigniting the trial. We continue to be very, very encouraged when we look at our Phase IIb data and how that continues to come forth as we look at — continue to look at data beyond 2 years. And we continue to be terribly excited about the potential of this product in the marketplace. And so there will be some disruption. Clearly, there’ll be some delay in clinical trial enrollment from our initial expectations. But we’ll keep the investment community adequately informed as we discover more in the coming months.

And then, Ravi, I’ll take the first part of your question and maybe kind of go to the punch line around each of our businesses. Starting with corneal health, I think in a normalized environment, we probably would have seen something that was in that neighborhood of $12.5 million to $13 million of sales versus the $11.2 million. That’s obviously factoring in the COVID-19 as well as a little bit of the integration-related impact in the quarter. On international glaucoma, on a constant currency basis, I think absent COVID, we probably would have landed somewhere in the $13 million to $13.5 million. So you can take that as being $1 million to $1.5 million impact from COVID-19 in that international glaucoma business.

And then in the domestic glaucoma business, there’s really the 2 pieces we talked about. The more than 2/3 impact from COVID-19, you can sort of translate into that, call it, $6.5 million ballpark. And I think it’s also worth adding in there that from an overall standpoint, we estimate that the impact from, we’ll call it the late 2019 promotional activities and the near-term impact of our integration activities, was probably somewhere between $5 million and $6 million in the quarter above and beyond that COVID-19 number.

Great. I appreciate the detail. And then just maybe one last one, a piggyback off Jon’s question on doc training. Can you talk about how you’re either sustaining or maintaining some of these protocols by either telemedicine training environments? Or is there anything kind of from a regulatory perspective that’s allowing you to kind of maintain contact for these doctors to diagnose patients through that arena that you guys are involved with? Any color there would be great.

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Chris M. Calcaterra, Glaukos Corporation – COO [34]

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Yes. So on the training side of things, you may recall that our protocol is for the physician to do an online training course. And I think there are 7 modules involved in when they do that. So that’s continuing. Then Part 2 and Part 3 are what may be a challenge moving forward. Which is to do a wet lab, the night before dry lab, typically done in the OR. We’re still going to be able to do that in many cases, in some, we may not be able to and we will find alternative methods of doing that.

And then finally is the proctoring piece. And in some cases, the reps are already in surgery, in some cases, that’s going to be restricted. So we have come up with some virtual ways to approach that, whether it’s done virtually before or after or even in some cases, might be done during. So we’re working through those as we’re just getting up and started. We’ll see how those — how that goes, but we have some other ideas as well, but we’re not restricted from a regulatory standpoint in that regard.

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Operator [35]

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And our next question comes the line of Ryan Zimmerman of BTIG.

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Unidentified Analyst, [36]

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This is [Brian] on for Ryan. So I just want to ask a little bit about the Avedro business for a second. The tripling the number of capital placements, Joe, can you just talk about how that business model has changed? And if you expect that to normalize maybe there was some demand — some docs at the ready who were looking for maybe a lease-type arrangement. I’m just kind of curious kind of how to think about that business going forward?

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Chris M. Calcaterra, Glaukos Corporation – COO [37]

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[Brian], this is Chris. Early on, for the last couple of quarters, we talked about capital equipment not being an impediment to the sale. And so we’ve come up with a variety of different ways to approach the placement of the capital. I think that had a lot to do with it. I’d also say the fact that we’ve got the glaucoma team involved, 60-plus people also talking about the iLink procedure and the benefits and the virtues of it. And so there’s more touch points. I think the execution has been superlative. I think that this is a good indication that, a, it was a good acquisition for us; and b, that the ideas and strategies and — that we put in place in the execution are bearing out. So I’m quite happy with what took place in the first quarter and hopeful that, that will continue throughout the year.

And I think it’s a little bit probably early for us to call a trend off of one quarter, right? Especially one quarter in which then we operate in this disruptive environment. So we’ll have to continue to watch that. Similar to what we were just talking about at length around the new doctor training dynamics, we also expect some disruption and headwinds in terms of new site installations, if you will, or new starts within the coronal health businesses as folks get back up and running here in the post-COVID era.

Yes, and I’m just going to reiterate how pleased [we are] with the overall integration. We look at what we’ve accomplished from the corporate milestones, commercial strategies and achieving the cost synergy goals. I think those have been prolific. And I think when we look at what’s happening commercially, we’re just starting to unlock the potential and that’s why I’ve given Chris approval to increase the size of the sales force. You might have noticed the sales force on the corneal health size has gone up over 30% since we acquired Avedro. So you can see it’s a testament to how we feel, how bullish we are and how we are currently viewing the early stages of this acquisition.

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Unidentified Analyst, [40]

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That’s helpful, Tom. I appreciate that. The timing on MicroShunt, I think we’re currently thinking about it later this year, kind of year-end. I just want to confirm that, that’s still your guys thinking in terms of potential approval?

Yes. Happy to address that, Brian. I think it’s probably fair to say that Santen has taken the position that they expect to have approval of their MicroShunt in the fiscal year 2020. So that will place it by the end of March 2021. So that probably gives you a better indication of where they are at. And as you can expect, given the COVID-19 disruptions, they haven’t filed their PMA submission, although their initial target was to get it filed in the first quarter. But they do have a conference call, an earnings call that will occur next week. We’ll both be listening in to see exactly where they are, and we’re hopeful they’ll be filing that PMA in very, very short order.

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Operator [42]

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And our next question comes from the line of Anthony Petrone of Jefferies.

And I hope everyone is doing well and staying healthy. Maybe just a follow-up to PRESERFLO would be iStent infinite. Just the timing there. I think we had late ’21. So I’m just trying to get a sense of iStent infinite, and really just, I guess, more broadly, the timing for the cataract stand-alone label with those 2 solutions? And then the second question would be just on COVID impacts to the iStent, iStent inject business. How much of the iStent overall users are actually dark at this point versus just those seeing reduced procedure volumes?

So I’ll be happy to take the first part of the question. Again, I’m going to reiterate that given Santen’s expectation, we’ll be looking for this stand-alone capstone product, the MicroShunt from Santen to be available by the end of the first quarter this coming year. And we look at iStent infinite, as we’ve said before, we completed enrollment in October of last year. We will file these patients for the year. We’ll lock down the database. And we’ll be filing for that product, and we expect to have commercial approval late in 2021. So those estimates have been confirmed and validated, and we feel good about our position there. Chris?

Yes, it’s Joe. I’ll — on the COVID impacts, I mean, obviously, you expect it’s very dependent upon the individual geographies. And we’re set in the early days here within the U.S. that obviously matters most. You can watch the news flow and sort of guess where some of the early ordering activity is coming from in states like Texas and Arizona. But even in looking at that, it still feels like it’s very early days in terms of the number of customers that are ordering versus what we typically see. So I think we’re still — I can’t say who is dark versus active, but what I can tell you is we’re still in the very, very early days in terms of the restart activity, broadly speaking.